Sibneft Teams Up With Baker Hughes

In a move to increase competition for its contracts, oil major Sibneft signed a five-year agreement Tuesday with Baker Hughes, the world's third-largest oil field service company.

The agreement is the first of its kind for Baker Hughes, whose previous involvement with Russian oil companies was limited to equipment sales and short-term service contracts.

Sibneft, in its turn, is the first Russian oil major to sign on with all three of the world's highest-grossing service firms. It signed on with No. 1 Halliburton in February and has been working with Schlumberger since October 1999.

"We are creating competition among firms so that we will be able to determine the best solutions to our problems," said Sibneft vice president Andrei Matevosov. "At this new level of cooperation, we expect more access to technology and research."

Under the agreement, Baker Hughes is to establish an operational center at Noyabrsk, Sibneft's Siberian production base, and the two companies are to set up a joint engineering group.

In May, Russia and the United States signed a protocol intended to usher in a new age of energy sector cooperation between the two countries. Russian companies like Sibneft are posting double-digit production growth at a time when the United States is growing uncomfortable with its dependence on the Middle East for oil.

"I see Russia becoming a strategic support," said Mick Longton, director of worldwide operations at Baker Hughes. "[The protocol] gives us a sign of confidence. Russia has grown much more stable, and now is the time to develop relationships."

Baker Hughes, whose revenues were $5.3 billion in 2001, is currently negotiating a long-term service contract with another Russian oil firm, which company officials declined to identify.

Neither Sibneft nor Baker Hughes would put a dollar figure on the contract. Alexander Korsik, Sibneft first vice president, said there was "no ceiling" to the amount of money Sibneft was willing to spend to increase production.